Management Reset: Organizing for Sustainable Effectiveness

© 2010 University of Southern Californiaceo

Center for Effective Organizations

Management Reset:Organizing for Sustainable Effectiveness

Christopher G. WorleyUniversity of Southern CaliforniaCenter for Effective Organizations



Where am I going this morning?

• To explore an organization design logic that responds to the traditional forces of technological change, workforce shifts, and globalization, but also to a new set of forces – for agility and responsibility.

• To understand the challenges of transitioning to this new logic, we need to explore just a little bit of history



A History of Organizations and Organization Design in Two Slides



The first management was a “Perfect Storm”

Technological Change

Changes in Demand

Organization Capability

EfficiencyGrowthWealth



EffectivenessGrowth

Externalities


Changes in Demand


The second management fueled the storm… but did not change its character…



SustainableEffectiveness• Financial Results• Ecological Health• Social Integrity

Drivers of Agility

Drivers of Responsibility

The third management represents a very different design challenge


Changes in Demand




The Four “Ways” of An Agile,Sustainable Management Organization

The way work is organized…employ a “maximum surface area” structure, a flexible resource allocation system, transparent information, and a dynamic work system

The way behavior is guided…leverage a shared leadership philosophy and a remodeled board of directors

The way talent is treated…focus on human capital development and flexible reward systems

The way value is created…utilize a differentiated future focus, a sustainability-friendly identity, and a robust strategic intent



Sustainability is a Dynamic Capability…

Sustainable Strategies

Testing

Implementing

Perceiving

…that enables timely and effective organization changes in response to internal and external environmental changes. It yields consistently

above average levels of sustainable effectiveness.



Traditional View of Strategy, Organization, and Performance

• The more clear, focused, and committed a strategy is…

• …the more dedicated, resourced, and aligned its organization design…

• …the higher its financial performance



Nature of Episodic vs. Continuous Change

• Relatively long periods of stability are punctuated by short bursts of transformational change

• Relatively higher levels of change over long periods of time

Am

ount

of C

hang

e

Time

Episodic Change

Am

ount

of C

hang

e

Time

Continuous Change



Our core management messages have always supported stability as the path to performance

• Strategy– Sustainable competitive advantages

• Organization Design– Stamp out feelings and pursue bureaucratic perfection– Figure out how to reduce variation – uncertainty is bad– Alignment, congruence, and fit are the keys to performance– Buffer the technical core from environmental uncertainty– Moses in the wilderness

• Change Management– Unfreeze, move, refreeze (Lewin and Kotter)– Inertia is a powerful organization condition – resistance must be

“overcome”– Reengineering as the last great attempt to treat organizations like

machines– Create a sense of urgency – what’s the “burning platform”?



Implications of Episodic vs. Continuous Change

• Change capability lacking – rented when needed

• Focus on efficiency over innovation• Stability = Effectiveness• Change = Enemy• Performance reflects change pattern• Decision making centralized• Resources allocated through budgets

• Change capability embedded in organization design

• Focus on ambidexterity• Change = Effectiveness• Stability = Enemy• Performance reflects change pattern• Decision making shared/decentralized• Resources allocated through accountabilities

Am

ount

of C

hang

e

Time

Am

ount

of C

hang

e

Time

Episodic Change Continuous Change



One more thing…• Growth is commitment and stability cloaked in the

language of change and agility– Growth is low pervasiveness, low depth change– Growth hides waste– Growth is rooted in assumptions of population growth, but

not sustainable– Aggressive growth as an identity contributes to cycles of

boom and bust– Aggressive growth has its place and role, but its not

sustainable



“Shareholders are due a fair return, not the absolutely best return.”

William Weldon, CEO J&J

“In exchange for permission to pursue profits, business must behave and act in ways that protect and enhance the world we live in. You cannot just look at the bottom line.”

Kenneth Chenault, CEO American Express



Which is the more effective organization?

Nokia Loses More Ground to Its Competitors

Wall Street Journal – 1/28/2011

Apple Profit Muscles Past IBMWall Street Journal – 10/18/2010



Long-term Performance in Telecom

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

-0.2

-0.1

0

0.1

0.2

0.3

Network/Communications ROA Performance

Industry MedianMOTOROLA INCNOKIAAPPLEAT&TRO

A



Nokia’s Sustainable Strategy• Identity: Connecting People• Strategic Intent (~2008):– Breadth• High number of markets served• High in range of mobile devices and related services

offered– Aggressiveness• Low “in your face” factor

– Differentiation• Strong R&D group• Strong sustainability program/reputation• Currently missing in OS, killer apps, and killer devices



BREADTH

AGGRESSIVENESS DIFFERENTIATION

Nokia’s Current Strategic Intent

• Leverage historical breadth but focus on North American market

• Narrow product and service offerings in short term

• Maintain social and environmental orientation

• Leverage brand recognition to create “3rd” ecosystem

• Historically passive, pushing for greater speed in relationship with Microsoft

IdentityIntent: Defend the Brand



Nokia’s Core Logic

Group Executive Board

Corporate Functions

Nokia Research

Center

Mobile Solutions

Mobile Phones

Markets



Nokia’s Agility Routines• Perceiving

– Strong future focus (medium and long term) built into Nokia Research Center

– All parts of Nokia’s structure are tied into different external environments

• Testing– Innovation flow built into NRC and core structure (“no ‘green’

phones”)– Transparent decision making process built on debate and consensus

• Implementing– Twice yearly reviews, a range of rewards, and global leadership

development all support flexibility– A bottoms-up (for local responsiveness) and top-down (for

integration) goal setting process that creates tension



What the Nokia Case Teaches Us about the Transforming to Sustainable Designs Resolving the Dilemmas of Path Dependency

Strategy Dilemma Measures of Effectiveness Intent and Sustainability

Knowledge and Awareness Dilemma Sustainable Management is not Just About “Green” Programs Skills and Knowledge

The Capabilities Dilemma Managing the Transformation

Problems with Changing the Board Changing Identity Lead with the Work System Think Systemically Build in Learning Systems

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Center for Effective Organizations© 2010 University of Southern California

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Since its founding in 1979, the Center for Effective Organizations (CEO) has conducted cutting-edge research on a broad range of organizational effectiveness issues. As the leading university-based action-research center, CEO has influenced how organizations are managed and made important contributions to academic research and theory. CEO's pioneering research in organization design and effectiveness has earned it an international reputation for research that bridges the gap between academic theory and management practice.

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Management Reset: Organizing for Sustainable Effectiveness

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